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I. Firm and Contingent Agreement Areas

The Agreement Area comprises the Erbil Geological structure (the “Firm

Agreement Area" (FAA)) and the Demir Dagh Geological structure (the

"Contingent Agreement Area" (CAA)) all as defined in Annex A.

If Contractor, after drilling two wells under the Production Sharing

Agreement dated 25 June 2004 in respect of die Dihok .Area port ot the

Dihok Governorate (the "Dihok PSA") and one well in the FAA under this

Agreement, has not made a Commercial Discovery under the Dihok PSA

or this Agreement, then the following shall apply.

If the Contractor gives a notice to the Government prior to the end of the

First Phase to extend the Agreement Area the Contractor shall drill the

exploration well and acquire the seismic on the CAA forming part of UK-

Work Programme (Minimum Commitment) in III-4a). and the Agreement

Area shall for all purposes be deemed to be the FAA and the CAA and the

Work Programme in IIl4a) and the Financial Commitment in IH-tb) shall

apply and replace in all respects the Work Programme and Financial

Commitment in II-(a) and II-(b) respectively.

II-(a) Work Programme for FAA (Minimum Commitment)

The FAA has three Exploration phases with relinquishments alter I'1 and

2"J phase. There will he 1004 relinquishment after 3"' phase unless a

Development Area is defined.

Work Programme (Minimum Commitment) for FAA:

Fxploration Phase Period Seismic Exploration Relinquishment

(months) Acquisition Drilling (niter phase comph)

First Phase *) 48 50 km 21» I well 25%_

Second Phase 36 (optional) I well 2y,

Third Phase 36 (optional) well 1004

*) Contractor will carry out a typical geological field study as part of First

Phase commitment.

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Il4b) Financial Commitment for FAA (.Minimum Commitment!

Unit rate assumptions:

• Seismic - 2D: S20.(XXVkm

• Seismic - 3D: S>0.(XXYkni2

• Exploration w ell: S2.0 mill (exclusive of testing!

Summary of Minimum Financial Commitment:

exploration Phase Period

(Months) Financial


First Phase 48 S3.0 mill

Secood Phase 36_ S2.0 mill

Third Phase 36 S2.0 mill

Total S7.0 mill

III-(a) Work Programme for FAA and CAA (Minimum Commitment >

The FAA and the CAA has three Exploration phases with relinquishments

after 1“ and 2"1 phase. There will be 100*5 relinquishment after 3*J phase

unless a Dev elopment Area is defined.

Work Programme (Minimum Commitment) for FAA and CAA

Exploration Phase Period Exploration

(mounts) Acquisition Drilling (after*phase compL)

First Phase •) ••) 48 70 km 2D 2 wells 25*5


Second Phase 36 (optional l 1 well 25*5

l lmd Phase 36 (optional! 1 well 100*5

•> Contractor will cam out a tvpical geological field study as part of First

Phase commitment.

First Phase Minimum Commitment includes all Minimum Commitment

work carried out under ll-(al in respect of the FAA and CAA.

" *»If Contractor has not been able to drill the additional commitment well in

the CAA and any appraisal wells necessary to define j Development .Area

prior to the expiry of the First Phase, then Contractor may request the

Government to extend the First Phase to allow Contractor to drill such

commitment well and appraisal wells and/or to relieve the Contractor from the

obligation to relinquish any part of the FAA ami the CAA ai the end of the

First Phase.

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Ill-lb) Financial Commitment for FAA and CAA (Minimum Commitment)

L'nil rate assumptions;

• Seismic - 2D; $20.(XXVkm

• Seismic - 3D: S50.00(Vkm2

• Exploration \scll S2.0 mill (exclusis e of testing)

Summary of Minimum Financial Commitment:

Exploration lliuse Period Minimum

(Months) Financial



First Phase *) $5.4 mill

Second Phase 36 $2.0 mill

rinrd Phase 36 $2.0 mill

Total $9.4 mill

*) First Phase Minimum Financial Commitment includes all expenditure

expended and forming part of Minimum Financial Commitment in I III*) in

respect of the FAA.

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